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2 Social Justice in the EU Index Report 2015 Social Inclusion Monitor Europe Daniel Schraad-Tischler Contents I. Social justice in the EU: How does Italy compare? 4 II. Social justice in the EU: overall findings, in brief 6 III. Methodology: Dimensions and indicators of the Social Justice Index 16 Imprint 17 Download the full report at

3 I. Social justice in the EU: How does Italy compare? I. Social justice in the EU: How does Italy compare? Italy EU Social Justice Index 2015 Intergenerational justice 27 Poverty prevention 20 Health Equitable education Italy 25th of Labor market access 23 Social cohesion and non-discrimination Sweden Denmark Finland Netherlands Czech Republic Austria Germany Luxembourg Slovenia Estonia Belgium France United Kingdom Lithuania EU Average Poland Malta Slovakia Ireland Cyprus Portugal Latvia Croatia Hungary Spain Italy Bulgaria Romania Greece Overall: Overall, Italy s position on the latest SJI at rank 25 places it among the worst-performing EU countries with a score of Italy s performance in terms of social justice has fluctuated somewhat since 2008, and shows only a minimal improvement over its 2014 score of How Italy measures up against the other EU-member countries varies somewhat across the six dimensions, though it consistently ranks among the bottom third in all six dimensions. It performs worst in terms of intergenerational justice, where it ranks second to last, and ranks 23 rd in both labor market access as well as social cohesion and non-discrimination. With regard to our sub-index on children and youth, the country comes in on rank 23 rd with a score of Challenge: With the highest old age dependency ratio in the EU, Italy is most in need of a well-functioning labor market with high employment. Yet the country s score of 4.63 on labor market access is emblematic of the poor performance seen on most of the indicators that comprise this dimension. In 2014, only 55.7 percent of the working age population was employed, which is one of the lowest employment rates in the EU (only Greece and Croatia had a lower rate). More troubling is that Italian employment levels have been anemic going back at least to The employment situation for women has somewhat improved since 2008, but still remains far below 4

4 I. Social justice in the EU: How does Italy compare? parity or the EU average. Full-time employment has not protected all workers from poverty. A grudgingly high 9.6 percent of Italians working full-time were at-risk-of poverty in Looking at the Italian labor market from the perspective of the unemployed, it becomes clear how much must still be done. The overall unemployment rate has gone from 6.8 percent in 2008 to 12.9 percent in Since the crisis began, the long-term unemployed have seen their numbers more than double (from 3.1 % in 2008 to 7.8 % in 2014). Among youth, the unemployment rate has more than doubled since With 42.7 percent of 15-to-24 year olds unemployed (rank 25), the Italian administration faces a truly urgent policy challenge. Without rapid labor market activation, many of these youth are risk of being permanently shutout of stable employment and Italy will have to bear the long-term societal consequences. However, recent reforms point in the right direction. The country experts note that the scheduled labor market reforms, which will also introduce a general unemployment insurance, are ambitious and could lift Italy s labor-market policy to meet average EU levels. 1 Challenge: Structural weaknesses also threaten social cohesion. Italy has a high level of income inequality, with a Gini coefficient that has remained high for years. The percentage of children and youth who are threatened by poverty or social exclusion (32%) clearly exceeds the share of older people (65 or older) at-risk-of poverty or social exclusion (20.8 %). In addition, the country s NEET rate is the highest in our survey. In 2014, 32 percent of Italians 20-to-24 years old were neither in education nor training (a 10.4 percentage point increase over 2008). As mentioned earlier, these young adults are at-risk-of permanent exclusion from the labor market. In addition, the SGI country experts scored Italian social inclusion policy 4 out of 10 points. They find that the tax system s redistributive functions have largely ceased to work, having been curtailed by the rise in tax rates and the erosion of benefits and deductions due to inflation. 2 Challenge: Italy ranks second to last in terms of intergenerational justice. Aside from the poor prospects for young people on the labor market, the country is one of the demographically oldest countries in the EU and carries also one of the highest public debts (132 % of GDP). The fiscal burdens for today s young people as well as future generations are thus immense. At the same time, investment in research and development has remained low with only 1.3 percent of GDP. 1 Cotta/Maruhn/Colino (2015), available at 2 Ibid. 5

5 II. Social justice in the EU: overall findings, in brief 1. Social (in)justice in the EU The low point seems to have been reached, but no comprehensive turnaround is evident In the majority of EU countries, the extent of social justice relative to last year s edition of the Social Justice Index (SJI 2014) has at least avoided further deterioration. It appears that for the majority of countries, after several years of decline, the lowest point was reached between 2012 Figure 1: EU Social Justice Index (weighted) Rank Country Score Change to 2015 SJI 2008 SJI 2011 SJI 2014 SJI Sweden Denmark Finland Netherlands Czech Republic Austria Germany Luxembourg Slovenia Estonia Belgium France United Kingdom Lithuania EU Average Poland Malta Slovakia Ireland Cyprus Portugal Latvia Croatia Hungary Spain Italy Bulgaria Romania Greece Source: Own calculations. 6

6 and This is in large part due to slight labor market improvements visible in the majority of countries after Nevertheless, a genuine and comprehensive turnaround in terms of social justice is not underway. To be sure, a certain stabilization with regard to economic affairs is evident in many countries, at least on the basis of some indicators. This is true even of crisis-battered European countries like Spain, Portugal and Ireland. However, only future SJI editions will show whether social justice in Europe can sustainably stabilize and improve again. Social conditions and participation opportunities for people in most EU countries remain considerably worse than in the pre-crisis period. In no less than 11 countries, among them Spain and Portugal, things have deteriorated once again compared to last year s survey. 2. The extent of poverty and social exclusion are a continued cause of concern and the social gap between northern and southern Europe remains enormous Nearly one-quarter of EU citizens (24.6 %) are currently regarded as being at-risk-of poverty or social exclusion an extremely high and worrisome value. Measured against today s total EU population, this corresponds to approximately 122 million people. The gap between the northern European countries and the crisis-battered southern European countries remains enormous. In Spain, Portugal and Greece, the share of people threatened by poverty or social exclusion has increased once again in comparison to last year s survey. In Greece, 36 percent of the total population is at-risk-of poverty or social exclusion. In Spain, this figure is above 29 percent. For children and youth, these shares are even higher (for more detail, see below). In Portugal, the poverty rate within the total population has risen to 27.5 percent. By contrast, Sweden, Denmark, Finland and the Netherlands stand at the top of the overall index. In comparison to the situation in 2007/8, these countries, too, have suffered an overall decline in terms of social justice. However, compared to the much more dramatic developments in southern Europe, these countries remain in a very comfortable position. Thanks to lower poverty rates and above-average results in the area of health, the Czech Republic follows at 5 th place, while Austria, despite weaknesses in some areas (particularly education), still shows a high degree of social inclusion. Primarily thanks to its very good labor-market conditions, Germany has retained its 7 th -place position, though problems in the areas of education access and intergenerational justice are evident. In addition, income inequality and the risk of poverty and social exclusion have again increased in comparison to last year s study (after a slight decline in the years before). 7

7 3. Children and young people have been disproportionately affected in recent years the gap between old and young continues to grow In the great majority of EU member states, social conditions for children and youth have deteriorated since 2007/8, in some cases significantly. 3 Even compared to last year s survey, which marks the lowest point of developments to date, 13 countries have shown still-further deterioration with regard to life opportunities for young people. The situation particularly in the crisis-torn southern European countries of Portugal, Italy, Greece and Spain remains critical. Overall, the sub-index measuring the extent to which participation opportunities for children and youth are ensured clearly reflects the division of countries in the overall Social Justice Index. The best performers here are Sweden, the Netherlands, Denmark and Finland. The two top-placing countries have proved able to retain their very good level of performance throughout the crisis years. The Netherlands and several other countries, such as the Czech Republic and Poland, have even improved over this period. The fact that the risk of poverty among children and youth in some crisis-battered southern European countries has again increased in comparison to last year s survey is very troubling. In Spain, 35.8 percent of children and youth are today at-risk-of poverty and social exclusion, while this rate is 31.7 percent in Portugal. In Greece, this ratio is an alarming 36.7 percent, while the share of children living under conditions of severe material deprivation has more than doubled from 9.7 percent in 2007 to today s 23.2 percent. The figures are also alarming in Hungary: 41.4 percent of children there are regarded as being at-risk-of poverty and social exclusion. This share is higher only in Romania and Bulgaria, although the trend in these countries is on the decline. The poor performance of the United Kingdom is also striking. Here, 32.6 percent of people under the age of 18 are at-risk-of poverty and social exclusion. EU-wide, 27.9 percent of children and young people are threatened by poverty or social exclusion, which is clearly more than in 2007 (26.4%). However, such EU-wide averages are always difficult to interpret due to the differing population sizes of each country. When we look exclusively at the increase of poverty in the four crisis countries Spain, Greece, Portugal and Italy, then the average poverty rate of these four countries together has risen by more than 5 percentage points: from 28.7 in 2007 to today s 33.8 percent. In absolute numbers, this corresponds to an increase of 1.16 million children in these four countries alone. Moreover, it is particularly troubling that the trend of a growing gap between generations, already evident in last year s survey, has continued. While the EU-wide share of children at-risk-of poverty or social exclusion has increased since 2007, the share of older people at-risk-of poverty or social 3 Four individual indicators were used to compose the sub-index presented here: At risk of poverty or social exclusion (< 18 years), impact of socioeconomic background on student performance, NEET rate, and the rate of early school leavers. For more details, see the chapter on methodology. 8

8 Figure 2: Child and Youth Opportunity Rank Country Score Change to 2015 SJI 2008 SJI 2011 SJI 2014 SJI Sweden Netherlands Denmark Finland Czech Republic Slovenia Germany Estonia Austria Luxembourg Belgium Lithuania France Cyprus Poland Croatia EU Average Slovakia United Kingdom Latvia Ireland Malta Portugal Italy Greece Spain Hungary Romania Bulgaria Source: Own calculations. exclusion declined in the same period, from 24.4 percent in 2007 to the current 17.8 percent (2013/14). This is in large part due to the fact that in most countries during the crisis, pensions and retirement benefits for older people were not reduced or were not reduced as much as were incomes for the younger population. This was particularly clear in Spain, for example. Here, the share of children and youth at-risk-of poverty and social exclusion has risen to nearly three times the corresponding level among older people. 9

9 Additionally, the proportion of children and youth that suffer from so-called severe material deprivation is significantly higher as a cross-eu average than the corresponding share of older people. The difference is more than four percentage points (11.1% as compared to 6.9 %). Material deprivation means that the affected people cannot afford fundamental necessities of daily life (e.g., an appropriately heated apartment or a telephone) for financial reasons. A North-South divide similar to that for the poverty distribution is also evident in the share of young people between 20 and 24 years of age not in school, work, or any kind of vocational training. This so-called NEET rate (not in education, employment or training), with a cross-eu average of 17.8 percent, is still extremely high, although the rate has declined slightly in comparison to last year s survey (18.6%). This indicator is a particularly clear reflection of problems in the transition between the education system and the labor market. Young people who participate neither in the labor market nor the education system are in a very precarious situation that considerably limits their future participation opportunities. The situation is particularly dramatic in the southern European countries of Italy, Greece, Croatia, Cyprus and Spain. In Spain, around a quarter (24.8 %) of young people are so-called NEETs, while in Italy, which brings up the survey s rear on this indicator, the rate is close to one-third (32 %). Youth-unemployment rates in these countries are even higher: In Spain and Greece, youth unemployment is still well over 50 percent, and in Italy it has even risen again, to a rate of 42.7 percent. In contrast to the southern European countries, the lowest NEET rates are found in the Netherlands (7.8 %), Denmark (8.4%) and Germany (9.5 %). Germany is the only country that has substantially improved in comparison to The distribution of countries with regard to the indicator measuring the influence of socioeconomic factors on educational performance is less uniform (in the sense of the repeatedly observed North-South gradient). Here, countries such as Finland and Estonia are traditionally very well positioned, as their education systems provide children even from socially disadvantaged family homes with prospects equal to those of children from socially better-off families. Notably, Cyprus and Italy also perform very well in this regard. However, the education quality in Finland and Estonia, as measured by students Program for International Student Assessment (PISA) results, is significantly higher. These two countries show that equity and quality in the education system can in fact go hand in hand. By contrast, Hungary, France, Bulgaria and Slovakia show the greatest deficiencies with regard to the relationship between social background and educational achievements. Positive developments can be noted for at least one indicator, as the number of early school leavers has declined across the EU in recent years. However, a few significant discrepancies are evident here: While Croatia, Slovenia, Poland, the Czech Republic and Lithuania all show a rate of under 6 percent, the corresponding values for Malta and Spain are around 20 percent. However, the longterm trend is positive, which means the early school leavers indicator is one of the few EU-2020 indicators for which such a statement can be made. With an EU-wide rate of 11.2 percent, the EU-2020 target of 10 percent is no longer out of reach. 10

10 4. With rising debt, aging populations and stagnating investments in the future Europe must concern itself much more deeply with participation opportunities for children and youth Overall, the country comparison shows that the EU and its member states must target specific areas in order to sustainably improve life opportunities for children and young people. Intergenerational equity has again worsened in the EU. In addition to the already-mentioned widening gap between young and old with regard to the risk of poverty and exclusion, and the still extremely high youth-unemployment and NEET rates, further increases in debt have exacerbated the injustice between the generations. In this regard, despite a strong policy focus on budget consolidation, the overall debt of member states has again increased as a cross-eu average. The average level of national debt has risen from 62.5 percent of gross domestic product (GDP) in 2008 to a current level of 87.7 percent. The crisis-battered southern European states of Portugal, Italy and Greece now carry debt loads of between 130 percent (Portugal) and 177 (Greece) percent of their annual economic output, even though budget deficits have been scaled back through the implementation of harsh austerity policies. In Cyprus, the public-debt level more than doubled between 2008 (44.7% of GDP) and 2014 (107.1%). The fiscal burdens for today s young people as well as future generations in these countries are thus immense. At the same time, the average EU level of investment in research and development has not increased in comparison to last year s survey. In many countries, demographic change is weighing heavily on the financial viability of social-security systems. Given this trend, it is increasingly urgent that pension systems be made fit for the future without losing sight of the need for intergenerational justice. Pension reforms like those carried out during the most recent review period in Germany come clearly at the expense of younger generations. For this reason, Germany is among the countries that have deteriorated most significantly relative to the last survey with respect to intergenerational justice. 5. The EU remains far from achieving a Social Triple-A rating. Policymakers need to acknowledge that social justice has a positive effect on growth what can be done? When taking office last year, President of the European Commission Jean-Claude Juncker called for Europe to once again achieve an AAA rating in social terms. As the current analysis shows, the EU remains far from this point. Both member-state and the EU-level policymakers must take seriously the fact that more social justice can promote growth. In recent years, a number of studies on this issue (e.g. OECD 2015, Ostry et al. 2014) have found that increasing levels of inequality in incomes and opportunities have a negative impact on long-term economic growth. The EU therefore needs an integrated long-term strategy that supports this potential positive-sum relationship. In the future, it will be important that as announced by the new Commission social indicators be given a greater weight in the context of macroeconomic-coordination processes at the European level. 11

11 Overall, a multidimensional approach is needed in order to ensure more just conditions for societal participation. 4 There is not one single recipe that would solve all problems. And given the uniqueness of each country s socioeconomic makeup and their diverse political cultures, governments always have to find context-sensitive solutions. However, the dimensions of our Social Justice Index can help those looking to identify policy areas essential to advancing social justice and facilitating inclusive growth in Europe. Policymakers should target the following areas in developing actionable measures: Poverty prevention: Tackling child poverty must become a top priority in the EU and every member state. The Nordic countries show that low child poverty levels can be achieved when priorities are set and socially disadvantaged groups receive targeted support through a functioning tax and transfer system (e.g., effective child benefit and allowance schemes, housing benefits). However, combating poverty is not only a question of monetary support, it also depends on sound policies in other areas, such as education and employment. Equitable education: Investing in early-childhood education is a key component of efforts to level the playing field in this regard. Moreover, integrative school systems in which children are not separated early on according to their performance are a better alternative in terms of learning success and educational justice. Sending the best teachers to socially problematic schools and ensuring that students with learning problems receive individual support is also a promising way of improving quality and fairness of education systems. Generally, in order to limit the impact of socioeconomic factors on educational outcomes it is important that economically disadvantaged families receive targeted support to increase their opportunities to invest in education (e.g., reduced fees for child-care, early-childhood education, tertiary education). Labor market access: Creating incentives for high employment and enhancing upward mobility from non-standard to regular forms of employment are key challenges for almost all EU countries. Governments are well advised to invest in targeted qualification measures for low-skilled people and young people, who often find themselves in non-standard forms of employment. This is all the more important as low-skilled individuals are often also affected by long-term unemployment, which is one of the key drivers of poverty. The fact that there are still more than 12 million people in the EU who have been unemployed for over a year requires decisive political action. Between 2007 and 2014 the number of long-term unemployed doubled accounting for about half of the total number of unemployed. 5 With regard to youth unemployment, which is a massive problem not only in the European crisis states, governments must seek to improve vocational training, reduce the number of early school leavers and improve the transition from the education system to the labor market. Often, there is a strong mismatch between labor market demands and the qualifications provided by the educa- 4 See in this regard also Schraad-Tischler See in this regard 12

12 tion system. Balancing supply and demand on the labor market by providing sufficient mobility of the labor force according to the needs of potential employers is therefore very important. The EU s recently launched Youth Employment Initiative together with the so-called Youth Guarantee is certainly a step in the right direction. In this regard, the EU and its member states also need a much more efficient means of reducing the gap between vacant positions (which still exist) and the very high number of unemployed people not only within a country but across EU countries. A strong cross-border approach (e.g., through the effective cooperation of national employment agencies) is needed. Reducing bureaucracy regarding the mutual recognition of qualifications and creating easier ways to transfer social security entitlements to another country is important as well in order to increase labor mobility. Finally: Next to the particularly vulnerable groups of low-skilled individuals and young people, inequalities in access to the labor market also often exist for women, people with a migrant background and elderly people. Measures that enable parents to combine parenting and work, legal provisions that preclude discrimination, efforts to enforce the principle of equal pay for equal work as well as creating incentives for lifelong learning are useful instruments to address such inequalities. Social cohesion and non-discrimination: Strong economic and social inequalities not only impede sustainable growth, they also have very negative implications for social cohesion. Effective anti-discrimination legislation (and its implementation) is thus one crucial element in reducing inequality of opportunity. Countries such as Ireland, Sweden and the Netherlands are role models in terms of their anti-discrimination policies. Sound integration and immigration policies are also imperative to addressing the common challenge of demographic change. Most EU countries are increasingly economically dependent on immigration to rebalance the negative economic effects of societal aging. Policies fostering the integration of migrants should therefore ensure equal access to the labor market and education, opportunities for family reunion and political participation, the right of long-term residence as well as effective pathways to nationality. If policies are designed well and EU countries act on the basis of solidarity, the current refugee crisis can in the longer run also turn into a chance for Europe. Finally, the problem of social segregation in cities (for instance in France) is often not only confined to people with an immigrant background, but to socially disadvantaged people more generally. Discriminatory urban zoning laws and practices that make certain neighborhoods increasingly unaffordable for less well-off people should therefore be revised. In this context, governments could also consider establishing specific rent control regulations and social housing programs. Health: Poor health conditions and health-related inequalities generate high social and economic costs. It is therefore important that health care policies aim at providing high-quality health care for the largest possible share of the population and at the lowest possible cost. These objectives are best achieved in countries such as Luxembourg, Netherlands and Belgium. Governments must strengthen preventive health measures and conditions of access. Doing so can save a lot of money and improve the state of individual health in a society. The latter aspect is important because opportunities for societal and economic participation may be constrained 13

13 not only through structural injustices in a country s health care system, but also as a result of individuals states of health. Intergenerational justice: Improving opportunities for families through investments in child-care infrastructure, reducing the level of public debt and increasing the share of renewable energy are important policy measures in terms of greater intergenerational justice. As highlighted above, governments need to pay more attention to the interests of younger generations while pursuing policies that are equally sound for the young and old alike. Generally, the Nordic countries stand out in this regard. When it comes to pro-young and family-friendly policies, the provision of day care and preschool facilities as well as generous parental-leave schemes is still exemplary in these countries. Their successful approach to combining parenting and the labor market can thus serve as an inspiration for policy reforms in other countries. Generally, it is important to note that the different dimensions of social justice are strongly interrelated: Weak educational opportunities translate into weaker opportunities on the labor market and as a consequence into weaker opportunities to achieve higher incomes. There is a danger Figure 3: Social Justice 2015 and GDP per Capita Unit: SJI Score / GDP per capita, PPP 7 6 Czech Republic Estonia Slovenia France Finland United Kingdom Sweden Denmark Netherland Austria Germany Belgium SJI Malta Poland Lithuania Slovakia Latvia Portugal Croatia Hungary Cyprus Italy Spain Irland 4 Bulgaria Romania Greece 3 10,000 20,000 30,000 40,000 50,000 GDP per capita 2014 Source: Own calculations. 14

14 of a self-reinforcing process and vicious cycle. This is why the EU member states as well as the European institutions need to adopt a holistic view regarding the causes of social injustice, its impacts and potential political interventions. With regard to the latter aspect, it is interesting to see that it is indeed sound policymaking that matters for achieving greater social justice and not only economic prosperity. This is underlined by the distribution of countries in the two graphs, figure 3 and 4. Figure 4: Social Justice 2008 and GDP per Capita Unit: SJI Score / GDP per capita, PPP 8 7 Czech REpublic Sweden Finland Denmark Netherland Austria SJI Estonia France Belgium Germany United Kingdom Irland Slovakia Spain 5 Hungary Portugal Italy Poland Greece 4 20,000 30,000 40,000 GDP per capita ,000 Source: Own calculations. A closer look reveals that countries such as the Czech Republic, Slovenia and Estonia achieve a comparably high degree of social justice, despite only having average economic performance levels. These countries illustrate the fact that social policy plays a critical role in achieving social justice. Estonia s good performance is primarily driven by the areas of education and intergenerational justice, while the Czech Republic excels in poverty prevention. By contrast, a country like Ireland has a high GDP per capita but only performs below average in the Social Justice Index. 15

15 III. Methodology: Dimensions and indicators of the Social Justice Index III. Methodology: Dimensions and indicators of the Social Justice Index Figure 5: SJI Dimensions and Indicators Social Justice Index Poverty prevention Equitable education Labor market access Health Social cohesion and nondiscrimination Intergenerational justice (triple weight) (double weight) (double weight) (normal weight) (normal weight) (normal weight) At Risk of Poverty or Social Exclusion, Total Population At Risk of Poverty or Social Exclusion (Children, Seniors) Population Living in Quasi-Jobless Households Severe Material Deprivation (Total Population, Children, Seniors) Income Poverty (Total Population, Children, Seniors) Education Policy (Qualitative) Socioeconomic Background and Student Performance Pre-primary Education Early School Leavers Employment Older Employment Foreign-born To Native Employment Employment Women/Men Unemployment Long-term Unemployment Youth Unemployment Low-skilled Unemployment Involuntary Temporary Employment Social Inclusion Policy (Qualitative) Gini Coefficient Non-discrimination Policy (Qualitative) Gender Equality in Parliaments Integration Policy (Qualitative) NEET Health Policy (Qualitative) Self-reported Unmet Needs for Medical Help Healthy Life Expectancy Health Systems Outcomes Accessibility and Range Family Policy (Qualitative) Pension Policy (Qualitative) Environmental Policy (Qualitative) GHG Emissions Renewable Energy Research and Development Spending Government Debt Level Old Age Dependency In-work Poverty Low Pay Incidence Source: Own representation. With its EU Social Justice Index, the Bertelsmann Stiftung analyzes the development of participation opportunities in the 28 EU states on an annual basis. The index comprises six different dimensions of social justice based on 35 criteria: poverty, education, employment, health, generational justice as well as social cohesion and non-discrimination. The Social Justice Index will soon be supplemented by the EU Reform Barometer, which will track the specific reform efforts of member states in the individual areas of social justice. Combined the Social Justice Index and the EU Reform Barometer make up the Social Inclusion Monitor Europe (SIM). 16

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